Is India’s Tyre Sector Set to Achieve 8% Revenue Growth in FY26?

Mumbai, July 18 (NationPress) India’s tyre industry is projected to witness consistent revenue growth of 7-8 percent in the current financial year, primarily fueled by replacement demand, which constitutes half of the yearly sales. This insight comes from a report released by Crisil Ratings on Friday. The report anticipates that while offtake from original equipment manufacturers (OEMs) may be subdued, exports are expected to remain stable.

The trend towards premiumisation is likely to offer a slight boost to revenue realizations. However, challenges may arise from increasing trade tensions and the potential for dumping by Chinese manufacturers, who might redirect inventories due to US tariffs.

Operating profitability is expected to hold steady at 13-13.5 percent, bolstered by stable input costs and robust capacity utilization. These factors, along with strong accruals, healthy balance sheets, and prudent capital expenditure, will contribute to maintaining the sector’s favorable credit outlook, as per the report.

This analysis includes India’s top six tyre manufacturers, which serve all vehicle segments and account for 85 percent of the sector’s total revenue, estimated at around Rs 1 lakh crore.

Domestic demand remains a pillar for the industry, driving approximately 75 percent of overall volume, with exports filling the remainder.

Anuj Sethi, senior director at Crisil Ratings, stated, “Volume growth is projected at 5-6 percent this fiscal, consistent with last fiscal. The replacement segment, which represents around 50 percent of volume, is expected to grow 6-7 percent due to a large vehicle base, strong freight movement, and recovery in rural areas. The OEM volume, comprising 25 percent, is anticipated to increase by 3-4 percent, driven by steady sales of two-wheelers and tractors, along with modest growth in passenger and commercial vehicles. Export volume, also at 25 percent, is expected to rise by 4-5 percent, bolstered by demand from Europe, Africa, and Latin America.”

However, this export growth carries certain risks. The US, which accounted for about 17 percent of India’s tyre export volume last fiscal and 4-5 percent of the total industry volume, has imposed reciprocal tariffs on various Indian goods, potentially diminishing price competitiveness. Furthermore, steep US tariffs limit China’s access to the US market, raising concerns about excess supply being diverted into price-sensitive markets like India, as highlighted in the report.

In response to curb cheap imports, India enforces anti-dumping and countervailing duties, including a 17.57 percent tariff on large truck and bus radials from China. Nonetheless, a broader influx of low-cost tyres in other segments could pressure domestic realizations without timely safeguards.

Additionally, intense competition within the replacement market is likely to keep operating profitability within the 13.0-13.5 percent range this fiscal year.

With nearly half of the raw materials imported, the sector is vulnerable to global price fluctuations and foreign exchange rate variations. In fiscal 2025, the prices of natural rubber rose by 8-10 percent due to supply disruptions, while the prices of crude-linked inputs like synthetic rubber and carbon black increased by 10-12 percent. This led to a margin erosion of approximately 300 basis points, given the limited ability to pass costs through in both OEM and replacement segments.